HILSENRATH’S TAKE
Leaders reveal something about themselves when they choose running mates. The choice of a second-in-command – often the first choice a new leader makes – says something about the leader’s decision-making, confidence, priorities and perceived weaknesses.

In that vein, the White House’s choice of Stanley Fischer to become vice chairman of the Federal Reserve revealed plenty about the Fed’s incoming leader, Janet Yellen. As the Wall Street Journal and Bloomberg News reported last week, Ms. Yellen played a critical role in luring Mr. Fischer to the Fed for the number two position after he had been passed over for the top job. She reached out to him several weeks ago and urged him to consider taking the job, according to people familiar with the matter. Then she urged the White House to offer him the post. The sales job worked on both fronts.

Her behind-the-scenes maneuvering throws cold water on the idea that Ms. Yellen and Mr. Fischer are bound to clash over policy differences. Some analysts had sized up Mr. Fischer as a skeptic of the Fed’s experimental easy money policies. She presumably wouldn’t have recruited him to the Fed if she believed they might have problematic differences and he presumably wouldn’t have taken the job if he thought so. Of course, they might develop differences over time, but they appear to be starting out with a close partnership in mind.

It was a bold act by Ms. Yellen which rings of some self-confidence. Mr. Fischer is widely seen as a heavyweight among the world’s central bankers. As a professor as a professor at the Massachusetts Institute of Technology in the 1970s, he taught the likes of Ben Bernanke and Mario Draghi before moving on to a career of policy making himself, most recently as head of the Bank of Israel. Ms. Yellen appears not to have flinched at the risk of being shown up by her number two.

The move speaks to holes in Ms. Yellen’s resume which she might want help filling. Besides regular attendance at Bank for International Settlements meetings in Basel, Switzerland, she doesn’t have much international experience. He spent most of his policy making career on the international stage. He thus might help the Fed smooth over differences with other central banks, most notably emerging market central banks upset about the volatile capital flows caused by the Fed’s on-and-off easy money policies.

She wasn’t at the center of Fed decision-making during the crisis of 2007-2009, when she was president of the San Francisco Fed. Mr. Fischer at the International Monetary Fund in the 1990s and more recently at the Bank of Israel has a long record in crisis fighting which could complement hers. Finally, Mr. Fischer’s avuncular manner could come in handy in the difficult job of consensus-building within the Fed on the tough choices that lie ahead. The Fed’s sometimes restive regional bank presidents are sure to listen when Mr. Bernanke’s former thesis adviser gives them a call on behalf of the chairwoman.

- By Jon Hilsenrath

MORNING MINUTES: KEY DEVELOPMENTS FROM AROUND THE WORLDFed’s Lockhart: Taper Will Continue If Recovery Does. The Atlanta Fed President said if the economy meets his expectations, he’d like to see the central bank continue to wind down its bond-buying stimulus effort over the coming months. That view was unshaken by the weak December employment report. “I don’t think we should overreact to one month,” he said. http://on.wsj.com/1aXzavq

European Central Bank governing council member Ewald Nowotny said the ECB doesn’t see any prospect of deflation over either the short or medium term. He said there was no need for immediate action from the ECB but that the central bank had a “whole range of instruments” to hand for maintaining price stability. http://on.wsj.com/1aks5rV

BOE Says Act Fast to Catch Bubbles. When is the best time for a central bank to step in to rein in a burgeoning credit boom? Sooner rather than later, suggests a Bank of England analysis. http://on.wsj.com/1eDMjOT

European Parliament Backs Lautenschlaeger for ECB. The Bundesbank Vice President solid backing from the EP’s Committee on Economic and Monetary Affairs in a hearing on Monday, bringing her one step closer to joining the European Central Bank’s executive board. http://on.wsj.com/1kysH3S

Brazil Seen Raising Rates Again. The country’s central bank is expected to raise the base interest rate Wednesday for the seventh consecutive time after the fight against price increases gained new urgency following a worse-than-expected inflation result for 2013. http://on.wsj.com/1ceGBhy

U.S. Inflation Prospects Muted – NY Fed poll. Americans see low and stable inflation for the foreseeable future and gradual increases in home prices, according to a new consumer survey from the New York Fed. http://on.wsj.com/1gBwpnu

FORWARD GUIDANCE
- BOE Governor Mark Carney will appear before lawmakers to answer questions on the state of the financial system and the economy at 9:15 EST (1415 GMT)

RESEARCH
How much do changes in borrowing costs influence business investment decisions? Not as much as you might think, according to research by two Fed economists based on a survey of chief financial officers. http://on.wsj.com/1eP0i2A

Banks were willing to pay more — a lot more — to borrow money during the financial crisis if they could avoid using the Federal Reserve’s discount window, according to new research from economists at the Federal Reserve Bank of New York. http://on.wsj.com/1aySjXW

- Word count in Fed statements has risen to nearly 900 in December from around 500 at the end of 2008, when the financial crisis began: Deutsche Bank via DJ Market Talk

- U.K. inflation fell in December to its lowest level in more than four years, a surprise decline that should reinforce the Bank of England’s commitment to keep interest rates low to nurture the recovery. http://on.wsj.com/KgDe2B

- A strong rise in industrial production across the euro zone in November will reassure policy makers that the fragile economic recovery continued into the fourth quarter and may be picking up steam. http://on.wsj.com/JXYQkU

- Japan’s current account posted its largest deficit on record in November, as a weaker yen pushed up import costs but failed to give a strong enough boost to exporters. http://on.wsj.com/1eFRVYU

- Swiss house prices continued to rise sharply in the three months through December despite efforts by the Swiss National Bank to calm demand by raising the amount of capital banks have to hold against their mortgage loans. http://on.wsj.com/1hmc72u

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